My main concern with introducing new taxes is that it is difficult to introduce a new tax, but comparatively simple to fiddle with rates once the tax is introduced. Introducing, for example, a Land Tax at 2.5% will be difficult to accomplish unless income taxes are reduced in such a way that no taxpayer is worse off (which surely must be the goal). My problem is that once a 2.5% Land Tax (for example) is introduced, is it an easy step to increase it to 3%, or 3.5%. I simply do not trust the current government (much less the economic fuckwits and idiots on the other side of the house) to introduce a tax and then not use it to increase the overall tax take. Think the Rich Prick rate the treasonous Kullen introduced 5 minutes after taking office.

BTW, I’ve read Roger Douglas’ Alternative Approach paper, and all I can say is that I pray to God ACT get 10 or 11% in 2011, so they get a decent say in running New Zealand. Roger for Finance Minister?

Stick you taxs up your arses

Neill, I’ve advocated the simplicity of a single GST rate for a very long time.

The reason I’ve changed my mind is that on balance, the additional difficulty of implementing variable rates is outweighed by the benefits gained from influencing consumption of “the wrong things.”

If we want to change our spending habits and frankly we have to, we’d be foolish to overlook our primary weapon.

Don Brash recently had a look at this bubble in housing and found that indeed it wasn’t. He found that in NZ, despite the rugged weather and earthquake conditions that prevail, NZer’s spent less then the average of the OECD.

I’d love to see some sort of link for this, because it goes against everything that i’ve read about the housing bubble (for that is exactly what it is) that’s occurred over the last decade. You might want to start with http://www.data.govt.nz and move on to http://www.demographia.com/dhi-ix2005q3.pdf. If Brash has said as you’re quoting then we’re in worse trouble than i previously thought.

the reason people invest in property in NZ is not that property is such a fabulous investment, or that it has fantastic tax advantages – it is simply that business gives such poor rates of return.

You mean like Ryman Healthcare, who’s share price has risen 40% this year? Or Telecom, who keep pumping out 8% (after tax) year in year out? Not to mention the 25% gain in their share price. I’ll grant you, there are morons who are buying horrendously over-priced small businesses (cafes come to mind), but there’s no problem getting a decent rate of return even if you have the attention span of a jellyfish.

If you increased GST to 30% on luxury goods and dropped it to 5% on essentials, you’d be making a start. Of course, the bureaucrats say the key to GST is simplicity. So it was, in 1986. In 2009, we have IT solutions easily capable of handling the complexity of variable rates.

Mate, you obviously don’t own a business, or if you do, you have someone else do the GST for you. I use Banklink, Excel and online banking to do my GST calculations bi-monthly and it takes me about two hours. I estimate this would increase roughly five-fold if they implemented what you’re talking about. While it seems obvious on the surface, you still have to code entries, check your data and claims then lodge it with the IRD.
How do you propose that you’d put the claim in? Each purchase (and sale) would need to be accounted for, so you’d need separate workings for each item/rate combination. If you’ve ever seen the American tax tables (or even our own Customs book) you’d get an idea of what’s involved. It wouldn’t work, nor should an abomination like it ever see the light of day.

Multiple rates of GST would be a god send to the IT industry in NZ. Be like Y2K all over again. Tax attached to a product rather than one size fits all is entirely reasonable. I fear it would be to much of a departure from the status quo for a NZ govt. We would need a Labour party in 1984 mentality for that to happen and I don’t see that in National today. Reformers they are not.

The key to becoming wealthy isn’t high net income it’s low expenditure relative to net income combined with wise investment of the surplus. Of course once you implement that formula and turn it into a permanent lifestyle then (but only then) you turn to the question of increasing your net income.

This country has an extremely high potential net wealth given our resources and low population. In other words, it’s very easy to increase our net income. Our problem is that excess consumption and low savings is engrained in our lifestyle.

We need therefore to reduce our low yield in that area and that’s what the tax group should be focusing on at this point in our journey. If you increased GST to 30% on luxury goods and dropped it to 5% on essentials, you’d be making a start. Of course, the bureaucrats say the key to GST is simplicity. So it was, in 1986. In 2009, we have IT solutions easily capable of handling the complexity of variable rates. Secondly you need to incentivise domestic savings so the banks are less dependent on the foreign markets for capital. Thirdly super should be made compulsory.

There are various other adjustments as well. I don’t disagree with CGT on property esp residential rentals because they’re unproductive. But that shouldn’t be the main story. The main story should be, how do we change our lifestyle to become more like the Asian savers?

How about reducing tax on other investment, instead of introducing a new one?

Yep, this would be the best outcome.

“they need to tell us what they propose where the tax payer sustains a loss in capital value and when and how they propose that the property owner should be compensated”

Very simple (if you know anything about CGT or tax in general). Losses are carried forward, just like other tax losses. Some countries let you offset against income tax, others don’t.

I suspect we won’t see anything substantive from National unless they win the 2011 election.

I think we should see moderate changes started next year, with more put to the elctorate for the elction to get a mandate to do a decent job of reforming taxes and benefits.

(My investments include local property, and mainly foreign equities.)

They were so subtle about it they even raised the wages of everyone employed in the Govt. and public services both national and local, everyone who partook in Govt. contracts so that they could rape their pay packets as well.
This then caused all the people who started paying 39% to go and learn how they could lower their tax to pay. Many schemes evolved one of which was buying a rental house. That legitimately became a business and therefore was treated as such by the accounting profession.
To make this equation worse the reckless disregard for prudent spending by those same wealth destroyers in Govt. raised interest rates thus exacerbating the losses involved.
Its therefore not rocket science to see that had Clark not been greedy and added all this to the housing equation along with the continuing demands of local govt. that housing values in NZ would have remained at a lower level. Remember this all happened at a time when Kiwi’s were leaving droves, (88000 in one year alone), and we were still building plenty of new houses. Interest rates hovered about their long term average. In theory houses should have slumped in value but couldn’t because the costs of replacements were rapidly rising.
We now go into a situation where we are building 50% of the number of new houses we need. The banks are tight on funding new houses and our population is increasing at a reasonable rate. Nothing has been done to lower the cost of production for new housing, the councils are burdened with the leaky home problem which is not going away and as time goes by will get greater as more and more houses become condemned.

And you want a CGT to attack the housing market. Clearly you simply don’t have any reasonable thinking capacity as to cause and effect.
Don Brash recently had a look at this bubble in housing and found that indeed it wasn’t. He found that in NZ, despite the rugged weather and earthquake conditions that prevail, NZer’s spent less then the average of the OECD.

Watch house prices go ever upwards as the supply tightens, cost to build continues to escalate and wages rise with employment and exports in the next few years. The market will decide the price and if you interfere with that market it will be at your peril. Watch for a change in attitude within the next 6 months as people start to yell and scream that they can’t afford to rent and that there are no houses to rent. Its all coming their way.

More importantly as the tax group have decided that taxes should have a fairness and equity component (their excuse for CGT, and not a good one at all), they need to tell us what they propose where the tax payer sustains a loss in capital value and when and how they propose that the property owner should be compensated. (Much like the Maori’s and their carbon tax rebates.)

CGT is counter productive, doesn’t establish any fairness at all when you can get tax breaks from investing in Pies and various other schemes.
The best fairness about tax is to minimize the need and thus reduce the stealing that is involved.
Flat taxes, all the same value, no taxation on incomes under $30k, allowing combining of incomes for those in long term committed relationships. Apart from a few most people will pay tax at a lower level, just not at high levels which has been the cause of all this.

National should seize the chance to bring in a capital gains tax. I am usually opposed to taxes (as most are) but this is about correcting a distortion. The FUD put out by the property lobby is that other countries with CGT still had a property bubble. That is true but misses the point. Other countries also had an equity investment boom. We didn’t. As Bernard Hickey says, NZ is a “housing market with a few other things tacked on”.

You’re spot on. The property lobby has repeatedly made the point that there was a bubble in other countries but i always reply, “so fucken what?” Because the problem is not the “bubble” per se, it’s the fact that the benefits of that bubble aren’t flowing into the tax system, which is creating a distortion. I don’t care if there’s a bubble as long as those who benefit from it pay their dues – and thereby spread the tax base and also give pause to people as to whether they’d rather invest in property (which does fuck all to grow the economic base) or invest in the business sector (which might just help us get out of the kak).

“It agreed, however, that New Zealand’s current tax system is not sustainable as there are major growth, fairness and integrity issues.

Looks like another meeting of socialists. WTF has fairness and equity got to do with taxes unless of course we are talking about stealing from the rich to pay the poor, which is normal for all socialists.
Stop bloody stealing. Stop the waste. Stop expecting individuals and companies to supply a never ending fountain of money to be spent on their favourite things.

Given the times he should be cuting 1.1 billion.
When one lives a life of plenty then one never learns to be frugal.

Finance Minister Bill English is warning more red ink will flow from next month’s opening of the Government’s books and many government departments are being warned that they will have to cover all cost increases from within existing budgets.

English has confirmed Treasury’s half-year fiscal update and the 2010 Budget Policy Statement will be released on December 15.

English said the books would highlight “the legacy of Labour’s relentless spending increases over recent years”.

He signaled the Government is preparing further cuts in current spending, saying if National could not fund new priorities without pushing debt to unsustainable levels “then finding savings in existing spending will be critical”.

English said recent large spending increases provided ample room for reprioritisation. “This will be a feature of Budget 2010 as the Government delivers its priorities within the $1.1 billion cap it has set out for new operating spending.”

English said baseline budget spending had increased by 45 percent since 2005 while the economy had grown by 15 percent. “This kind of rampant spending growth is unsustainable and cannot continue.”

“No business or household can continue operating this way – and nor can the Government. That’s why this Government is taking steps to slow future spending increases and get debt under control.”

English has also dropped hints about where the cuts may come, listing education, health, corrections, police, and housing as areas where baseline spending had blown out.

Education spending was up 39 percent in five years, while health spending had increased by 35 percent. Corrections spending had almost doubled, while police was up 48 percent and housing 234 percent, although from a much lower base.

people will migrate to places where they can afford to buy their own home

Aren’t family homes excluded from CGT proposals?